Forming a Business Entity


When people decide to start a business, they usually have a great idea and some money to invest in the enterprise. Some people opt to start the business by themselves or with family members, while others have partners or other investors who will not be involved with the day-to-day affairs of the business. The laws that apply to businesses differ based on the specifics of the situation, and even business people who decide to go it alone have options to protect themselves from personal liability for business debts and obligations.

For this and other important reasons, you will need sound legal advice in the following areas:

1. Business Form - The choice of business form (i.e., sole proprietorship, partnership, LLC, or corporation) often dictates the legal responsibilities and potential liability of those involved in leading the business, as well as the manner in which it may operate. For example, choosing the wrong entity may make you personally liable for employees or partners.
2. Variety of Entities - Although there are five basic business entities, sole proprietorship, partnership, C-corporation, S-corporation, and limited liability company there are other options within these entities that determine things like double taxation and liability for the acts of partners.
3. Business Agreements - Setting up the business legal structure at the beginning should include an agreement among the owners. The agreement should include such things as how conflicts will be resolved, how to deal with a departing owner, how profits and losses will be divided. Depending on the type of business entity, you have need a partnership agreement, an operating agreement or a buy-sell agreement. Having business agreements in place will save you time and money in the long run -
4. Strict Conformity - You must strictly conform to the state law governing your business entity, or you may lose the benefits and protections of those laws.
5. Tax - Different business forms provide different tax advantages and disadvantages. The only thing more crucial to a new business is liability.
6. Liability - Different business forms provide different protections and risks to the business owner/investor. Personal liability means that your business puts everything you own at risk. Our Firm can help you avoid this situation or minimize your risk. Contact our Firm for a no-charge initial assessment to discuss your needs and learn how we can help you set up or run an existing business that maximizes profits and minimizes liabilities.